Screenshot/YouTube
- Christophe Barraud, the chief economist at Market Securities, is the top-ranked forecaster of the US, Chinese, and European economies.
- In an exclusive interview with Business Insider, he shared one major issue where his views differ from consensus, and why he thinks the outlook for investors is not as rosy as it appears.
The world’s most accurate economist is not quite ready to call a truce on the US-China trade war.
This week, companies from Apple to Caterpillar and Nvidia revealed the extent of the impact that the dispute had on their fourth-quarter sales — and the results weren’t pretty.
But Christophe Barraud — the Market Securities chief economist who makes his living assessing the damage and accurately predicting what happens next — says most experts are still too optimistic about the trade conflict.
The US and China face a March 1 deadline to reach a trade deal, or else American tariffs on $200 billion worth of Chinese goods will go into effect. To date, both countries have slapped tariffs on $360 billion worth of goods traded between them.
"I still think that global growth could be lower than people expect, mainly due to the sharp slowdown in global trade," Barraud told Business Insider by phone.
His track record of making such prognostications correctly is unparalleled, according to annual rankings compiled by Bloomberg. He was the most accurate forecaster of the US economy for seven straight years through 2018. He bagged the top spot for the European Union economy from 2015 to 2018, and was the most accurate on China in 2017 and 2018.
Barraud forecasts that the global economy will grow between 3%-4% this year — a pace he sees as being lower than the consensus due to his reservations about the trade war’s fallout.
In fact, he’s not ruling out an outright contraction in the first quarter of this year. To back up this viewpoint, he pointed to the weak trade data that recently came out of South Korea and Vietnam, both blamed on the US-China friction.
"We are seeing more and more signs of a global synchronized slowdown," Barraud said.
That’s a 180-degree change in the narrative — and reality — that prevailed two years ago, when the world’s largest economies were growing in unusually simultaneous fashion.
Besides the US and China, Barraud also sees Britain’s tumultuous exit from the European Union as a complicating factor for investors.
"Right now, the main factor that people need to look at is Brexit, and the small probability of a hard Brexit," he said. "It could be a game changer for the global economy."
In his view, there are three ways the UK’s exit could happen. The first scenario is one in which Europe makes concessions to the UK in order to strike a deal. He sees this as unlikely to occur before the European parliamentary elections in May.
The second scenario is a Brexit delay, and the third is a hard departure that leaves the UK empty-handed with no deal.
"I don’t believe that a hard Brexit will happen, but the fact is that the probability is rising every day," Barraud said.
The silver lining amid all this uncertainty is that central banks are eager to introduce whatever stimulus measures are necessary to avert a slowdown in their respective countries, Barraud said.
Earlier this week, the Federal Reserve confirmed just as much and allayed investors’ worst fears about a policy error. The Fed’s policy statement said it will be "patient" as it determines future adjustments to interest rates. Also, Chinese policy makers are pumping stimulus into their economy, which is already mired in a slowdown.
All this political uncertainty is poised to create more volatility in markets during the first half of the year, Barraud said. Although no region is spared, Barraud still prefers US stocks because they offer "more visibility, at least in the next couple of months."
He added: "I think that looking at Europe, there are too many uncertainties right now. I’m a bit more negative than the consensus concerning eurozone growth."
NOW WATCH: We compared Apple’s $159 AirPods to Xiaomi’s $30 AirDots and the winner was clear
See Also:
- One shocking chart suggests the biggest tech stocks are in for a rude awakening — and that sharp losses could be coming
- GOLDMAN SACHS: A recent shift is suddenly creating new winners in the stock market, and the gains are just getting started
- The US economy may have just saved itself from a surefire recession — here’s why that should quell fears of a stock market crash
Source: Business Insider